KARACHI: Government's total debt rose 11.34 percent to Rs19.647 trillion at the end of October from Rs17.645 trillion in the same period of the last fiscal year, the latest figures issued by the central bank showed.
A higher pace of public debt accumulation indicates the government has been unable to reduce the size of the fiscal deficit during the current fiscal year due to the shortfall in revenues.
The government is frequently relying on domestic and external borrowings to finance its growing fiscal deficit.
The government appears to have been stuck to its strategy of raising money through short to long term domestic instruments and loan disbursements from external lenders to expand economic growth.
The data revealed the bulk of the increase in the government debt came from the domestic sources. The domestic debt of the government went up to Rs14 trillion as of October 31 as compared to Rs12.657 trillion a year ago.
Unlike the previous years, the share of short-term debt showed a moderate build up, amounting to Rs6.168 billion in October against Rs4.816 trillion in the corresponding period of FY15.
The short-term debt includes shorter tenor instruments such as market treasury bills and Bai Muajjal.
The government debt market skewed heavily towards banks, as they [commercial banks] financed most of the government’s funding requirements.
Borrowing from commercial banks through market treasury bills stood at Rs3.156 trillion as of October 31 against Rs2.709 trillion in the same period of the last fiscal year.
However, less supportive market conditions discouraged the government to borrow more through Pakistan Investment Bonds (PIBs).
The government borrowed Rs4.140 trillion from banks through PIBs as compared to Rs4.307 trillion a year ago. This showed shift in composition of domestic debt from long-term to short-term.
The share of external debt showed upward trend, as the government borrowed more from the foreign lenders. External debt of the government increased to Rs5.558 trillion against Rs4.987 trillion during the corresponding month of the last fiscal year.
Pakistan is among those countries where domestic debt dominates the overall public debt. The SBP’s annual report on the state of economy for the fiscal year 2015/16 reveals that with the largest pool of investible funds, commercial banks are the major financier of budget deficits in Pakistan.
“In other countries with fairly big volumes of domestic debt, like Brazil, India and South Africa, the government’s dependence on the banking system is much less,” the report added. “Pension fund and insurance companies also share the burden of budgetary financing. Further, foreign investment in the government papers (local currency denominated) is also sizeable in some countries, but in Pakistan, this funding is very low.”